United States District Court, S.D. New York
March 2, 2004.
AIH ACQUISITION CORP. LLC and LINCOLNSHIRE MANAGEMENT, INC. Plaintiffs
JOSEF F. BOEHM and ALASKA INDUSTRIAL HARDWARE EMPLOYEE STOCK OWNERSHIP PLAN Defendants
The opinion of the court was delivered by: RICHARD OWEN, Senior District Judge
OPINION AND ORDER
In August 2001, plaintiff Lincolnshire Management created AIH
Acquisition Corporation ("AIH Acquisition"), which it wholly owns, to
purchase and hold Alaska Industrial Hardware ("AIH"), of Anchorage,
Alaska. Lincolnshire, AIH Acquisition and AIH then entered into a
commitment letter ("Commitment") expressing the parties' intent that "the
Buyer and the Company, the Seller and its agent will exert every
reasonable effort to negotiate and execute a definitive Agreement, in
form and substance satisfactory to the respective parties and their
attorneys." The Commitment also contemplated that "the transaction shall
be subject to the execution and delivery of a definitive stock
purchase agreement." Defendant Josef Boehm, an officer and the
majority shareholder of AIH, personally initialed each page of the
In the days that followed, all the parties in this case expended a
great amount of time and resources and travel to fulfill their
obligations under the Commitment to work out the fine details of the SPA.
Throughout September and October of 2001, plaintiffs, at considerable
expense, did their due diligence and by mid-November plaintiffs'
consultant had issued its preliminary report. The parties exchanged
numerous drafts* of the SPA. The lawyers extensively reviewed and revised
these drafts pursuant to their obligations under the Commitment. Over the
next few months, they exchanged dozens of e-mails taking forward the SPA
negotiations. As pleaded in paragraph 28 of the Amended Complaint, which
I accept as fact,*fn2 on or about February 4, 2002, seller Boehm's
lawyer Braley "informed plaintiffs' counsel that Boehm and
the ESOP [the minority shareholder] had reached an agreement on
material issues between them." (emphasis
supplied). Braley essentially confirmed this in an e-mail of
Feburary 20 to among others, fellow attorney Snow and Coyle, plaintiffs'
lawyer, which reads in part:
We recognize that John Hommel will not be back
until the first week in March. We are hoping to
work out all of the pieces between now and then.
We are expecting to have Joe Boehm sign the
Agreement early next week and attempt to close
during the first week in March.
After all the above, on March 27, 2002, a significant day, the lawyers
for the parties continued their exchange of e-mails. Plaintiffs' counsel
Coyle sent a "revised SPA . . . urg[ing] everyone to limit comments to
essential matters." Within hours, defendants' lawyer Braley responded: "I
have read the changes. . . . Unless I am missing some point, they appear
to conform to the substance of our conversations and seem acceptable to
us." Shortly thereafter, Braley e-mailed "Looks like we're good to go"
and followed up with two more e-mails urging Coyle to get something to
"put under Joe's [Boehm's] nose," and then demanded, "Where is it? Hal
[Snow] is going nuts." By 6:30 that evening, Coyle had complied and sent
an e-mail to the parties distributing an execution copy of the agreement:
"Attached is the final SPA. Everyone, including the lawyers,
has stated it is final without qualification."*fn3
Notably, defendants' counsel not only did not object to Coyle's
characterization of the agreement as final, but to the contrary,
defendants' counsel Braley indicated assent, replying, "It's off to Hal
[Snow, Boehm's other lawyer]. Thanks." Braley acknowledged in an
affidavit that he sent it on. Two days later, however, Boehm refused to
sign, demanding more money (Boehm Answer ¶ 40).
Even in the face of this, the parties for both sides continued their
efforts to close the deal. Plaintiffs, at Boehm's lawyers' insistence,
even agreed to "sweeten the pot."*fn4 This built to the April 16, 2002
gathering of almost all the major participants in Anchorage, Alaska at
the Hotel Captain Cook. The presidents of plaintiffs Lincolnshire and AIH
Acquisition flew in from New York and their lawyer flew from Seattle as
did Boehm's lawyer Snow. They had preliminary discussions. Plaintiffs'
complaint then states in detail at paragraph 45:
The next day, on or about April 17, 2002,
Plaintiffs' representatives went to Snow's office.
Shortly after their arrival, Snow advised them
that "Joe [Boehm] has accepted the deal." The
parties then shook hands on the deal, and
Plaintiffs proceeded to draft the revisions to the
Stock Purchase Agreement, which Snow approved.
Upon Snow's request, Plaintiffs executed the
revised Agreement in his offices. Snow then stated
that Boehm would sign the Agreement later that
night after dinner or, at the latest, the next
Boehm's Answer admits this by its continued fudging use of the "deny
knowledge or information . . . " device where the answer was available on
a phone call.*fn5
As mentioned, there was a big dinner, and Boehm specifically admits in
his Answer (¶ 46) that he went to the dinner.*fn6 But the evening
and the next day came-and-went without Boehm signing.
There is more than minimal support for Boehm's occasional highly
bizarre behavior resulting from his penchant for the highly excessive use
of alcohol,*fn7 for violence evidenced in court papers regarding
a woman he lived with over some years*fn8 and I note that a grand jury
voted an indictment in Federal Court in Alaska in January 2004, Index No.
A04-003CR, charging Boehm with an extensive two year conspiracy with
others, they to furnish cocaine and crack to females under twenty-one to
obtain sex with them. The foregoing is appropriate to consider as
supportive evidence of Boehm's unpredictability and irresponsibility
toward others as well as both the plaintiff buyer here, and his own
lawyers in the transaction as well. It is significant that there has
never, however, been any contention whatsoever by Boehm or his lawyers at
any time that he is not normally competent and indeed, the facts to
establish incompetence are way beyond even the highly distressing conduct
from time-to-time which has support in the record here. See, e.g.,
McKeon v. Van Slyck, 119 N.E. 851, 852 (N.Y. 1918); Feiden v.
Tully, 542 N.Y.S.2d 860, 862 (App. Div. 1989). The farthest his
lawyers have ever gone in this area is to tell plaintiffs lawyers that
once an agreement has been reached, ". . . the matter is a question of
when he signs and not if he signs."
Needless to say after all this, plaintiffs were outraged by Boehm's
obstinate off-again-on-again position. In a letter dated April 22, 2002,
counsel for the plaintiffs formally told Snow that they considered
Boehm's failure to perform as a breach of the SPA, and admonished that
legal consequences could follow. To this, tellingly, Boehm's lawyer Snow
rather forthrightly responded, "Let her rip. It's what I would do if
I were in your shoes. " (emphasis supplied). To this day, Boehm
continues to refuse to sign or perform under the SPA.
There are several ways to map the path to the just and proper
conclusion here. The first is agency. Attorneys Snow and Braley acted as
Boehm's agents for the purpose of reaching a binding stock purchase
agreement. An agency relationship requires that both the principal and
the agents take affirmative steps to "assure the success of a cooperative
effort." Popkin v. National Benefit Life Ins., 711 F. Supp. 1194,
1202 (S.D.N.Y. 1989). The burden is not solely on the agent. The
principal, too, must use his best efforts to cooperate and "cannot by act
or omission `thwart the effectiveness of the agency.'" Id.
(citation omitted). Moreover, a principal "must avoid `conduct towards
third persons [that] prevents the accomplishment of the work of the
agent.'" Id. at 1203-03 (citation omitted). Thus, Boehm, who at
least twice told his attorneys he was satisfied and there was a deal, may
not defeat the efforts and good faith representations that his attorneys
made in furtherance of the Commitment by capriciously refusing at the
last instant to sign an agreement which all had agreed was in final form.
Another path to the appropriate conclusion here is the application of
the doctrine of promissory estoppel as nullifying the requirement of the
essentially ministerial act of Boehm signing the final agreed document.
Thus, notwithstanding Boehm's refusal to
sign the SPA, I find here the existence of a binding obligation on
his part to sign under the doctrine of promissory estoppel, which promise
Boehm has wrongfully flouted. Under New York Law,*fn9 promissory
estoppel may be invoked where there is (1) a clear and unambiguous
promise to sign; (2) a reasonable and foreseeable reliance by the party
to whom the promise is made; and (3) an injury sustained by the party
asserting the estoppel by reason of his reliance. See Esquire Radio
& Elec., Inc. v. Montgomery Ward & Co., Inc., 804 F.2d 787,
793 (2d Cir. 1986). Where a plaintiff is successful in satisfying these
elements, the Court has discretion to award relief "as justice requires."
See Merex A.G. v. Fairchild Weston Sys., Inc., 29 F.3d 821, 826
(2d. Cir. 1994).*fn10
Certainly by April 17, 2002 when, after many, many thousands of dollars
of expense to the plaintiffs from the original signing of the Commitment
in August of 2001 for due diligence and financing and lawyers' time spent
in reasonable reliance, which otherwise would be lost to one man's
caprice, and Boehm's lawyers saying more than once that it was not a
question of if, but when, and Boehm, without comment, attending the
Anchorage dinner following such representations, where everyone was
gathered, some from thousands of miles away, and had that day themselves
signed, the requirements of promissory estoppel to sign and thus do
appropriate justice are clearly met. There is therefore here a
fully-written contract a deal the terms of which were
complete and final being the instrument the plaintiffs signed in
Anchorage on April 17, 2002 in Boehm's lawyer Snow's office, at Snow's
request which Boehm had to have been told about by Snow on or before the
dinner together with the statement he was to sign that evening or the
next day. Accordingly, in the above circumstances it is a valid contract
for the sale of AIH to AIH Acquisition even absent Boehm's signature, and
it is so declared enforceable forthwith today.